Over the last two years Google has been a ferocious, startup- munching acquisition machine. In 2010 it did 48 deals. In 2011 the company announced a record 79 purchases and investments, shelling out about $2 billion, not counting the still-pending deal to buy Motorola Mobility for $12.5 billion. But here we are one-quarter of the way through 2012, and there have been no deals at all. Radio silence. Zilch. Has Google’s once-hearty appetite for acquisitions been sated? In short, no. David Lawee, head of the mergers and acquisitions group at the internet search giant, says its fasting will end any day now.
“The store is still open,” says the Canadian-born entrepreneur and former venture capitalist in an interview at Google’s offices in Mountain View, California. “There’s just less randomness in moving things through.” Where once such randomness meant picking up lots of “interesting” companies that might one day become important, now acquisitions have to be deemed “strategically important” at the outset by the business leaders overseeing Google’s seven main product areas: Search, ads, social, commerce/local, YouTube, Android and the Chrome browser.
“We have a set of things that we’re working on building that are so vast that getting them right is critical,” says Lawee, 46, who manages a couple of dozen people in the M&A group. “There may come a time when we get all these things done and we end up taking a more, I don’t know, opportunistic approach. But I think we know what we’re executing on. We have a lot of opportunities in those areas.”
Lawee hasn’t previously spent a whole lot of time explaining Google’s acquisition strategy, which he’s been overseeing since February 2008 after a two-year stint running marketing.Over the past few months, though, Lawee has become comparatively garrulous about Google’s new approach to M&A, especially as attention has focussed on deals that haven’t panned out. The company’s crazed shopping spree— averaging better than one deal a week for two years—has produced a fair share of duds and missed opportunities.
They include the 2005 purchase of Dennis Crowley’s Dodgeball, a location-based social networking service. Crowley, saying he couldn’t get the support he needed for his mobile service, left and Google shut down Dodgeball in 2009. Crowley went on to start Foursquare, another location-based social networking service that boasts 15 million users.
Lawee admits missing the mark with Dodgeball. But he also notes that two-thirds of Google’s acquisitions have been successful, based on the company’s own metrics, and that the deals have been instrumental in bringing significant new businesses into the Googleplex. Among the more noteworthy success stories: Android (mobile), YouTube (video), DoubleClick (display advertising), Keyhole (which became Google Earth) and Writely (Google Docs).
“They’re big bets that took a little while, but they’ve really paid off,” says Dan Salmon, an analyst with BMO Capital Markets in New York. “DoubleClick and YouTube are linchpins to the company’s strategy today. DoubleClick is a massive platform that runs most of the Web’s display ad technology, and it’s become an even more dominant platform under their supervision.”
An undisclosed number of entrepreneurs—Lawee will only say it’s a “huge, crazy” number—have stayed on following the buyout of their companies, Crowley aside. Crowley “was way ahead of his time and years ahead of where we were strategically,” Lawee says. “It’s important to get the message out to entrepreneurs of the successes, just so they have a more balanced view. So they’re not just thinking, ‘I’m going to sell my company and leave,’ because that’s kind of a failure for us.”